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Sears Canada loss more than doubles, as sales and revenue fall

Sears Canada’s new acting chief executive says the results are disappointing but expenses have been controlled and the company will focus on increasing sales.

The bad news continues for Sears Canada, as its quarterly loss ballooned and sales at stores open at least a year dropped by 9.5 per cent. (Ryan Remiorz / THE CANADIAN PRESS)

By The Canadian Press

Tues., Nov. 18, 2014

Sears Canada Inc. had a $118.7 million net loss in its fiscal third quarter, more than double the national retailer’s comparable loss last year, as same-store sales and total revenue dropped and the bottom line felt a bigger impact from income taxes and asset writedowns.

The loss for the 13 months ended Nov. 1 amounted to $1.16 per share, compared with 2013 third-quarter net loss of $48.8 million or 48 cents per share.

On an adjusted basis, Sears Canada had a $19.4 million loss in this year’s third quarter compared with $7.3 million of earnings before interest, taxes, depreciation and amortization (EBITDA).

Sears Canada said its revenue for the 13-weeks ended Nov. 1 dropped to $834.5 million from $982.3 million, partly as a result of store closures last year. Sales at locations open for at least a year also decreased by 9.5 per cent.

The third quarter net loss included a $44.4 million pre-tax impairment charge, which was double the $22.6 million recorded in the comparable period last year. The loss also included a $43.7 million income tax expense, which compared with a $16.7 million income tax recovery a year earlier.

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One positive note, however, was that expenses related to its multi-year “transformation” effort contributed $4 million to this year’s third-quarter loss, compared with $20.2 million in the 2013 third quarter.

It’s the first financial report from Sears Canada since the appointment of Ronald Boire as acting chief executive officer. He stepped in after Douglas Campbell announced in September that he would leave the company and return to the United States by the end of the year for personal reasons.

Boire said the third-quarter results were disappointing but the Sears Canada management team is focused on building its relationship with consumers by providing “great fashionable product made of high quality at affordable prices.”

“The company has done well at managing expenses year to date and maintaining a strong balance sheet, and we are now working at growing our top line to have our sales match the high level of loyalty and support that Canadians have for the Sears brand,” Boire said in a statement.

Before joining Sears Holdings Corp., where Boire served as chief merchandising officer and president of the Sears and Kmart Formats, he held various retail leadership roles, including as president and CEO of retailer Brookstone Inc. and Toys R Us where he was president of the North American division.

Boire said last week in an interview with The Canadian Press that he hopes to chart a recovery for the Canadian department-store chain, including scaling back on products that don’t sell like they used to.

On Monday, the company said it will end a credit-card issuing partnership with U.S. bank JPMorgan Chase when the current 10-year agreement expires next November.

Sears Canada sold its credit and financial services business to JPMorgan Chase in 2005 for about $2.2-billion. The agreement came with a “long-term marketing and servicing alliance” between the two companies. Under that agreement, JPMorgan Chase will remain the service provider for the Sears Card and Sears MasterCard until Nov. 15, 2015.

Under certain circumstances, the U.S.-based bank could pay Sears Canada up to $174 million as part of the windup.

Sears Canada is a publicly traded company but a majority of its shares are directly or indirectly controlled by Edward Lampert. He and ESL Partners LP announced last week that they and certain affiliated entities owned 49.5 per cent of the Canadian company’s outstanding shares.

Indirectly, Lampert also controls Sears Holdings Corp., which has reduced its share of Sears Canada to about 17 per cent of the total shares outstanding.

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